Falafelnomics: Purchasing power in the Middle East

The Big Mac Index – now a golden standard for measuring purchasing power– doesn’t quite size up the region’s economic situation. This index determines the purchasing power of different currencies by comparing the prices of McDonald’s signature hamburger in various countries. But in the Middle East, eating at an international food chain, like McDonald’s, is often more expensive than local restaurants. This means that a Big Mac doesn’t represent what common folk can afford.

Second, since the Big Mac is not popular in the Middle East, it has no place in what economists call a “market basket of goods” – the goods and services that a typical consumer purchases in a month. The Big Mac, as a homogenous good, is a viable candidate for standardizing a bundle of goods across 120 countries. Yet, in the Middle East, where Big Mac’s are purchased mainly by expats, the rich, and locals who crave an occasional Western meal, the index falls short as a basis for comparison.

Not many surprises: a felafel sandwich costs a lot more in Israel than it does in Gaza. What's a little startling is that the price is similar in Riyadh (in one of the more wealthy Arab countries) and Sana'a (Yemen being the poorest Arab state). Forbes explains:

The price of a falafel sandwich in Syria’s war-torn capital has risen by 60 percent, largely because of the high cost and scarcity of a key condiment: tomatoes. The increase has been so large that the head of the Consumer Protection Association in Damascus has called for greater price controls. In some shops, a falafel sandwich can cost more than 100 pounds ($0.68) – this despite the exchange rate declining as the Syrian Pound collapses.

In Yemen’s capital Sana’a, where average monthly income is $37.43 less than in Damascus, the price of a falafel sandwich can be $1.18 (174 percent) more. Surges in food prices have left well over half of Yemeni children under the age of five suffering from chronic malnutrition, one of the highest rates in the world. The paucity of arable land and a water supply depleting at an unsustainable rate, largely due to the country’s overcultivation a narcotic called qat, have forced the country to import the vast majority of its food supplies. Falafelnomics shows that Yemen is one of the worst-off countries in the region, purchasing power parity.